May a Qualified Automatic Contribution Arrangement (QACA) set automatic enrollment at 6% to avoid the deferral annual escalator?
Rev. 08/23/07, E-mail Alert 2007-11

Click here for updated information based on the Automatic Enrollment Final Regs, which were issued February 24, 2009.

Although we are awaiting guidance on the QACA, there is much talk among practitioners about avoiding the administrative burden of tracking each new participant for four years on the 3%, 4%, 5%, 6% escalator; by setting the automatic enrollment percentage for all participants at 6%. Without further guidance, we know of no reason that this would not be allowed; although when queried at last year's ASPPA annual conference in October, the IRS expressed concerns about the appropriateness of a 10% each-year arrangement.